It’s not a question of in or out, but of whether Britain can avoid the flames
of destruction

Forget the arrest warrant row, free movement of labour, budget surcharges and all the other invasions that come with membership of the European Union. There is a much bigger menace hovering above what my colleague Peter Oborne has called the “dreary parochialism” of the British debate on Europe than erosion of national sovereignty.

Set against Europe’s abject failure to solve its economic problems – now fast transmogrifying into a degree of political instability not seen since the Second World War – Britain’s obsession with the relative merits of being in or out seems not just parochial, but almost wholly irrelevant.

Economically and politically, Europe is sinking fast, and it seems powerless to save itself. Our island nation cannot indefinitely escape these destructive dynamics. At this week’s CBI annual conference, there was much talk of the damage that uncertainty over British membership of the EU was doing to business confidence.

Really? There is absolutely no evidence of it in the data, which continue to point to above trend UK growth in both business and inward investment. It is not Britain’s quarrels with Brussels that are the real danger to business, but Europe’s growing economic and political malaise.

Indeed, the way things are going, there soon won’t be a Europe to be part of. The greater threat to our future is not loss of European markets and investment, but a continent paralysed by political crisis and economically crippled by malfunctioning monetary union. Europe pretends to be a single nation, but is incapable of acting like one.

That this tragedy is in part caused by the enforced march to federalism is beside the point. Whatever the reasons, Europe is burning up again, and, historically, it’s always been impossible for Britain to escape Europe’s flames.

Curiously, it is to American officials – who are not even part of the European Union – that we must turn to find these frustrations best articulated. In recalling Europe’s impotence in the face of gathering financial crisis, Tim Geithner, the former US treasury secretary, was this week quoted as saying: “I completely underweighted the possibility they would flail around for three years. It was just inconceivable to me they would let it get as bad as they ultimately did.”

These sentiments find their mirror image in what Mr Geithner’s successor, Jack Lew, had to say to the World Affairs Council in Seattle on Wednesday. Pointing the finger squarely at Europe, Mr Lew said that the global economy could not prosper by relying on the United States to be the importer of first and last resort, nor could it count on the US growing fast enough to make up for weak growth elsewhere.

Britain finds itself in the same boat. In order to compensate for economic failure in Europe, the UK is forced to pursue reflationary policies that in the long term it can ill afford. What is already one of Europe’s most unbalanced economies is being compelled by Europe’s tragic series of wrong turns into becoming even more dependent on pumped up domestic demand.

We see the consequences of this in what is likely to be the largest budget deficit in Europe this year, an again virtually non-existent household savings rate, and an excess of imported tradable goods over exports running at a record £10 billion a month.

With an election looming, Government ministers like to boast of Britain’s superior economic performance, yet the reality is one of increasingly unsustainable policy in a desperate counter to Europe’s contractionary madness. Britain has again joined America as Europe’s consumer of last resort.

It is an economic truth pretty much universally acknowledged that you cannot deflate your way out of a debt trap, yet it seems entirely lost on the eurozone high command.

As ye sow, ye shall reap. Across the continent, traditional centrist politics are in a state of meltdown. Nowhere is this more apparent than in Spain, where a radical Left party that didn’t even exist 10 months ago is now topping the polls. Ill-judged attempts by the Rajoy government to use the crisis as a means of strengthening Madrid’s grip on the country have meanwhile reignited Spain’s centuries old centrifugal forces. It’s not just the Catalans who threaten to break away.

What goes for Spain is just a proxy for Europe as a whole, where attempts to impose fiscal discipline from the centre have resulted only in growing public alienation and anger. In France, the polls are led by an anti-European crypto-fascist with a Left-wing agenda that makes even the disastrous François Hollande look moderate.

In Italy, the only viable alternative to the beleaguered Matteo Renzi is a professional comedian, Beppe Grillo, with no apparent policies at all, or few that make any sense. Even in Germany, the protest vote is fast gaining momentum. As with Ukip, Alternativ für Deutschland has taken off like a rocket since it widened its appeal from the single purpose of bringing back the beloved Deutschmark to an anti-immigrant, law and order, agenda.

The European Union is failing. Whether we are in or out scarcely seems to matter any more. In imagining it does, many of our leading businesses and politicians are woefully behind the curve. Something will eventually emerge from the wreckage. But whatever it is, it won’t be the status quo.